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TMI Blog2023 (12) TMI 364X X X X Extracts X X X X X X X X Extracts X X X X ..... he sum assured at Rs. 3,00,000/- (Rupees Three Lakhs only). After the demise of the husband, the petitioner made a claim for the sum assured. On receipt of the communication from the petitioner, the second respondent through impugned letter dated 24.06.2021 informed the petitioner that the deceased had nominated his brother, viz., the third respondent/S.Muthuvel Raj as the nominee and therefore, the claim will be paid only in favour of the nominee. Aggrieved by the same, the present Writ Petition has been filed before this Court. The first and second respondents have filed a counter affidavit. For proper appreciation, the relevant portions in the counter affidavit are extracted hereunder: "4) I submit that as the policy is in force on the date of death of the assured Mr. S.Arul, Rs. 3,00,000/- + the bonus of Rs. 2,02,500/- totally Rs. 5,02,500/- is payable under the policy if the claim is admitted after receipt of all requirements. Since the nominee has applied for the policy amount by producing the original policy and the claim papers, our Insurance Company was not considered the claim of the Writ petitioner and to that effect we have sent a letter dated 16.06.2021 to the writ p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to extract Sub Sections 7 to 10 of Section 39 of the Insurance Act, 1938, hereunder: "39. Nomination by Policy holder:- (1)... (7). Subject to the other provisions of this section, where the holder of a policy of insurance on his own life nominates his parents, or his spouse, or his children, or his spouse and children, or any of them, the nominee or nominees shall be beneficially entitled to the amount payable by the insurer to him or them under sub-section (6) unless it is proved that the holder of the policy, having regard to the nature of his title to the policy, could not have conferred any such beneficial title on the nominee. (8) Subject as aforesaid, where the nominee, or if there are more nominees than one, a nominee or nominees, to whom sub-section (7) applies, die after the person whose life is insured but before the amount secured by the policy is paid, the amount secured by the policy, or so much of the amount secured by the policy as represents the share of the nominee or nominees so dying (as the case may be), shall be payable to the heirs or legal representatives of the nominee or nominees or the holder of a succession certificate, as the case may be, and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... XII Rule 6 CPC. Drawing the attention of the Court to the said provision, learned counsel argued that based on admission of facts in the pleadings or otherwise, orally or in writing, it is open to the Court, at any stage of the suit, without waiting for determination of any other question between the parties, to make such order or give a judgment, having regard to the admissions. Appellant No. 1 admitted in the written statement that she had received a sum of Rs. 2,48,53,000/- as well as money under two policies as a nominee of the deceased. Being the mother, Respondent No. 1 is a Class-I legal heir and entitled to 1/4th share and there is no infirmity in the order of the Trial Court, as the admissions were clear and unambiguous. 21. It is argued that reliance of the Appellants on the Insurance Act, 1938 as amended by Insurance Laws (Amendment) Act, 2015 is misplaced in view of the settled law that a nominee does not have an absolute right over the estate of the deceased, as nomination is not a 'Will'. Several Courts have held from time to time that a nominee in an insurance policy only acts as a receiver on behalf of the legal heirs of the deceased policy holder and onc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... insurance amount, which is subject to be disbursement amongst the legal heirs under the law of succession, governing the parties. In fact, the said judgment has been followed subsequently in a long line of judgments not only by this Court but different High Courts from time to time. Relevant paras of Sarbati Devi (supra) are as under:- "5. We shall now proceed to analyse the provisions of Section 39 of the Act. The said section provides that a holder of a policy of life insurance on his own life may when effecting the policy or at any time before the policy matures for payment nominate the person or persons to whom the money secured by the policy shall be paid in the event of his death. If the nominee is a minor, the policy-holder may appoint any person to receive the money in the event of his death during the minority of the nominee. That means that if the policy-holder is alive when the policy matures for payment he alone will receive payment of the money due under the policy and not the nominee. Any such nomination may at any time before the policy matures for payment be cancelled or changed, but before such cancellation or change is notified to the insurer if he makes the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry succession is not relaxed even where wills are registered. xxx xxx xxx 8. We have carefully gone through the judgment of the Delhi High Court in Uma Sehgal case [AIR 1982 Del 36 : ILR (1981) 2 Del 315]. In this case the High Court of Delhi clearly came to the conclusion that the nominee had no right in the lifetime of the assured to the amount payable under the policy and that his rights would spring up only on the death of the assured. The Delhi High Court having reached that conclusion did not proceed to examine the possibility of an existence of a conflict between the law of succession and the right of the nominee under Section 39 of the Act arising on the death of the assured and in that event which would prevail. We are of the view that the language of Section 39 of the Act is not capable of altering the course of succession under law. The second error committed by the Delhi High Court in this case is the reliance placed by it on the effect of the amendment of Section 60(1)(kb) of the Code of Civil Procedure, 1908 providing that all moneys payable under a policy of insurance on the life of the judgment debtor shall be exempt from attachment by his creditors. The High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easons to hold that all these decisions are wholly erroneous, the Court should be slow to take a different view. The reasons given by the Delhi High Court are unconvincing. We, therefore, hold that the judgments of the Delhi High Court in Fauza Singh case [ AIR 1978 Del 276] and in Uma Sehgal case [AIR 1982 Del 36 : ILR (1981) 2 Del 315] do not lay down the law correctly. They are, therefore, overruled. We approve the views expressed by the other High Courts on the meaning of Section 39 of the Act and hold that a mere nomination made under Section 39 of the Act does not have the effect of conferring on the nominee any beneficial interest in the amount payable under the life insurance policy on the death of the assured. The nomination only indicates the hand which is authorised to receive the amount, on the payment of which the Patna High Court CWJC No. 12012 of 2018 dated 25-09-2019 insurer gets a valid discharge of its liability under the policy. The amount, however, can be claimed by the heirs of the assured in accordance with the law of succession governing them." 28. However, the contention of the Appellant is that Section 39 of the Insurance Act, 1938 was amended by The Insu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ections (7) and (8) shall apply to all policies of life insurance maturing for payment after the commencement of the Insurance Laws (Amendment) Act, 2015. (11) Where a policyholder dies after the maturity of the policy but the proceeds and benefit of his policy has not been made to him because of his death, in such a case, his nominee shall be entitled to the proceeds and benefit of his policy. 30. Section 39 was amended by the amending Act No. 5 of 2015 and was pursuant to the recommendations of 190th Report of the Law Commission of India, relevant passages from which are as under:- The Law Commission's views:- 7.1.12 There appears to be a consensus of sorts on the need for drawing a clear distinction between a beneficial nominee and a collector nominee. It is not possible to agree to the suggestion made by some of the insurers that in all cases the payment to the nominee would tantamount to a full discharge of the insurer's liability under the policy and that unless the contrary is expressed, the nominee would be the beneficial nominee. Although it is true that this is the law in USA, Canada and South Africa, the social realities of our country where the death of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of Section 39:- "7.1.15 To give effect to the above recommendations, the Law Commission is of the view that s.39 be recast as follows: xxx xxx xxx (7) Subject to the other provisions of this section, where the holder of a policy of insurance on his own life nominates his parents, or his spouse, or his children, or his spouse and children, or any of them, the nominee or nominees shall be beneficially entitled to the amount payable by the insurer to him or them under sub-section (6) unless it is proved that the holder of the policy, having regard to the nature of his title to the policy, could not have conferred any such beneficial title on the nominee. (8) Subject as aforesaid, where the nominee, or if there are more nominees than one, a nominee or nominees, to whom sub-section (7) applies, die after the person whose life is insured but before the amount secured by the policy is paid, the amount secured by the policy, or so much of the amount secured by the policy as represents the share of the nominee or nominees so dying (as the case may be), shall be payable to the heirs or legal representatives of the nominee or nominees or the holder of a succession certificate, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration by the Delhi High Court and considering the facts and circumstances of that case, the nominee, who was appointed under the Policy was held to be a beneficiary nominee and was hence, entitled to appropriate the entire sum assured. 8. There is yet another reason as to why this Court has to hold that the nominee takes the sum assured absolutely. For this purpose, Sub Section 8 to Section 39 of the Insurance Act, 1938, becomes relevant. This provision states that even if in case the nominee dies, the legal heirs/legal representatives of the nominee will be entitled to the sum assured absolutely. This gives a clear indication that the nominee, who is nominated by the policy holder takes the sum assured absolutely and for all purposes, he is treated as a beneficiary nominee. 9. The facts of the case before the Delhi High Court did not pose any difficulty for the Court to arrive at a conclusion, since it was a dispute between the wife and the mother-in-law and both of them are entitled to be treated as beneficiary nominees under Sub Section 7 to Section 39 of the Insurance Act, 1938. In the instant case, the third respondent is the brother of the deceased and the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent cannot be brought within the scope of Section 39(7) of the Act, it would only mean that he will be treated as a collector nominee. The Insurance Company cannot deal with the inter-se rights and the claim between the petitioner and the third respondent and the company has to entrust the sum assured to someone who has been nominated under the policy. By handing over the sum assured to the nominee, the job of the Insurance Company comes to an end. Thereafter, it is not the concern of the Insurance company to see as to who has the rightful claim over the sum assured and whether it actually goes into their hands as per the personal law governing the parties. Therefore, the concept of nomination is only to ensure that the Insurance Company does not get into the area of dispute and the Company washes of its hands by handing over the sum assured to the nominee. If the nominee falls within the scope of Section 39(7) of the Act, those persons described therein automatically takes it as a beneficiary nominee. If the person does not fall within the scope of Section 39(7) of the Act, he can only be treated as a collector nominee and he has to hold the money in trust subject to the claims m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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